Teva Pharmaceutical Industries Ltd.'s (TEVA) fourth-quarter profit declined 34%, as higher acquisition-related costs more than offset a revenue increase fueled by last year's purchase of Cephalon Inc.

The world's biggest manufacturer of generic drugs increased its quarterly dividend by 25%, to an equivalent of 26.8 cents per share at Tuesday's exchange rates. This continues Teva's stepped-up efforts to return cash to shareholders, including a recently authorized $3 billion share repurchase program.

The Israeli-based company, which is undergoing a leadership transition, said 2011 was a challenging year in which its U.S. generics business came under pressure. But Teva said it ended the year on the upswing, and the company recently predicted its earnings and sales would rise in 2012, aided by the introduction of new generic drugs that could help its U.S. business recover.

Teva, which has diversified into brand-name and over-the-counter drugs, expects sales growth for its U.S. generics business to outpace market growth in 2012, Chief Executive Shlomo Yanai said on a conference call with analysts. Yanai plans to retire in May and will be replaced by former Bristol-Myers Squibb Co. (BMY) executive Jeremy Levin.

J.P. Morgan analyst Chris Schott said in a research note that Teva's fourth-quarter results showed "a clear uptick on performance after a difficult year overall."

Teva shares rose 3.1% to $44.87.

For the fourth quarter, Teva reported a profit of $506 million, or 57 cents a share, compared with $771 million, or 85 cents a share, a year earlier.

The latest quarter included costs related to acquisitions, restructuring, legal settlements and other items. Excluding these items, earnings would have been $1.59 a share, a penny ahead of the mean estimate of analysts surveyed by Thomson Reuters.

Fourth-quarter sales rose 28% to $5.7 billion, helped by last year's $6.8 billion acquisition of Cephalon, which expanded Teva's branded drug business.

U.S. revenue rose 32% to $3 billion, while European revenue rose 13% to $1.5 billion. Revenue in the rest of the world rose 44% to $1.1 billion.

Generic product revenue rose 12% to $3 billion. U.S. generic revenue declined 5%. Teva's U.S. generics business suffered last year because it didn't have as many big product launches as in 2010.

Branded products were up 68% to $2.3 billion. Teva's biggest drug, the Copaxone treatment for multiple sclerosis, had sales of $927 million, up 11%.

Teva and other generic-drug makers are capitalizing on a wave of patent expirations for top-selling drugs. Eli Lilly & Co.'s (LLY) Zyprexa antipsychotic and Pfizer Inc.'s (PFE) Lipitor cholesterol-lowering drug recently lost U.S. market exclusivity, and Merck & Co.'s (MRK) Singulair allergy and asthma drug will lose protection later this year.

Teva expects one of its biggest generic-drug launches in 2012 to be a copycat version of Forest Laboratories Inc.'s (FRX) Lexapro antidepressant.

Teva reaffirmed its forecast of 2012 earnings of $5.48 to $5.68 a share, excluding certain items such as legal settlements.

-By Peter Loftus, Dow Jones Newswires; +1-215-982-5581; peter.loftus@dowjones.com

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